I will summarize this feature here, add some links and annotations and, well, venture a few of my own questions. Also, I believe this is a logical follow to three previous Subway Fold posts about the music biz including:

In mid-2017, the music tech market is generating signals as to its direction and viability. For example, Jawbone, the once thriving manufacturer of wearable audio devices is currently being liquidated; Soundcloud the audio distribution platform let go of 40 percent of its staff recently only days before the firm’s tenth anniversary; and Pandora has experienced high turnover among its executives while seeking a sale.

Nonetheless, the leaders in music streaming are maintaining “the music industry’s growth”. Music tech showcases and music accelerators including SXSW Music Startup Spotlight, the Midemlab Accelerator, and Techstars Music are likewise driving market transformation. During 2017 thus far, 54 music startups from more than 25 cities across the globe have taken part in these three entities. They have presented a range of submissions including “live music activations and automated messaging to analytics tools for labels and artists”.

While companies such as Live Nation, Balderton Capital and Evolution Media have previously invested in music startups, most investors at this mid-year point have never previously funded a company in this space. This is despite the fact that investments in this market sector have rarely returned the 30% that VCs generally seek. As well, a number of established music industry stars are participating as first-time or veteran investors this year.

Of the almost $900 million funding in music tech for the first half of this year, 75% was allocated for streaming services – – 82% of which went only to the leading four companies. However, there remains a “stark disconnect” involving the types of situations where music accelerators principally “lend their mentorship” in “hardware, virtual reality1, chatbots, label tools”, and the issues that VC concentrate the funding such as “streaming, social media, brands”. Moreover, this situation has the potential of “stifling innovation” across the industry.

To date, music accelerators have “successfully given a platform and resources” to some sectors of the industry that VCs don’t often consider. For example, automated messaging and AI-generated music2 are both categories that music accelerators avoided until recently, now equal 15% of membership. This expansion into new categories reflects a much deeper “tech investment and hiring trends”. Leading music companies are now optimistic about virtual digital assistants (VDA) including chatbots and voice-activated systems such as Amazon Alexa3. As well, Spotify recently hired away a leading AI expert from Sony.

Rhythm

However, this “egalitarian focus” on significant problems has failed to “translate into the wider investing landscape” insofar as the streaming services have attracted 75% of music tech funding. The data further shows that licensing/rights/catalog management, social music media, and music, brands and advertising finished, in that order, in second at 11.1%, third at 7.1% and fourth at 3.9%.

These percentages closely match those for 2016. Currently, many VCs in this sector view streaming “as the safest model available”. It is also one upon which today’s music industry depends for its survival.

Turning to the number of rounds of music tech funding rather than the dollar amounts raised, by segments within the industry, a “slightly more egalitarian landscape” emerges:

Music hardware, AI-generated music, and VR and Immersive media each at 5.0%

Live music; music brands and advertising; streaming; and social music media each at 15.0%

Categories that did relatively well in both their number of rounds of funding and accelerator membership were “catalog management, social music platforms, and live music”.

Those music tech startups that are more “futuristic” like hardware and VR are seen favorably by “accelerators and conference audiences”, but less so among VCs. Likewise, while corporate giants including Live Nation, Universal Music Group, Citi and Microsoft have announced movement into music VR in the past six months, VC funding for this tech remained “relatively soft”.

Even more pronounced is the situation where musical artists and label services such as Instrumental (a influencer discovery platform) and chart monitors like Soundcharts have not raised any rounds of funding. This is so “despite unmatched attention from accelerators. This might be due to these services not being large enough to draw too “many traditional investors”.

An even more persistent problem here is that not many VCs “are run by people with experience in the music industry” and are familiar with its particular concerns. Once exception is Plus Eight Equity Partners, who are trying to address “this ideological and motivational gap”.

Then there are startups such as 8tracks and Chew who are “experimenting with crowdfunding” in this arena but who were not figured into this analysis.

In conclusion, the tension between a “gap in industry knowledge” and the VCs’ preference for “safety and convenience”, is blurring the line leading from accelerator to investment for many of these imaginative startups.

My Questions

Of those music startups who have successfully raised funding, what factors distinguished their winning pitches and presentations that others can learn from and apply?

Do VCs and accelerators really need the insights and advice of music industry professionals or are the numbers, projects and ROIs only what really matters in deciding whether or not to provide support?

Would the application of Moneyball principles be useful to VCs and accelerators in their decision-making processes?

[This post was originally uploaded on August 18, 2014. It has been updated below with new information on January 12, 2015.]

The title of a report on TechCrunch.com on August 5, 2014, The Jury Is Out On Legal Startups , appears to say it all. As it describes the current state of this specialized market for technology aimed at supporting law offices as well as benefiting consumers, investments by venture capital investment firms in this sector has fallen rather dramatically thus far in 2014. With just a few exceptions that have received substantial rounds of funding, many other have not fared well in raising money for their operations. I recommend a click-through and full read of this for the full details of this slump including some informative charts and accompanying quotes by experts in this field explaining the difficult dynamics currently affecting this market.

This turn of events and dollars seems to run contra to all of the five far more optimistic and enthusiast posts I have grouped here under the category of Law Practice and Legal Education. These cover different aspects of ongoing innovations in the marketplace for legal services as well as legal education.

Notwithstanding this situation, I continue to remain optimistic about the ongoing prospects for legal startups. There is a vast under-served market for people who need legal services but do not have the funds to engage them. I think it is nearly inevitable that some of these developing systems, services and apps will find a place in this market segment out of pure necessity and the economics of getting things done faster and cheaper. Continuing to monitor this situation will thus likely prove interesting during the next several years. Perhaps there is a legal app yet to be developed that will prove to be so helpful to lawyers and their clients, as has happened in so many other consumer markets, which will act as a genuine tipping point.

January 12, 2015 Update:

Less than four months after TechCrunch.com posted the article described above, the site followed up with a much more upbeat assessment of the legal startup environment in a most interesting post on December 6, 2014 entitled Legal Tech Startups Have A Short History And A Bright Future by Basha Rubin. I will sum this up and add a few additional links in order to present the author’s contrasting point of view. (I previously saw Ms. Rubin give a very informative presentation at a legal industry program called Reinvent Law NYC in February 2014.)

The author is much more sanguine about the prospects of startups in the legal services market, even while acknowledging the combined effects of the lag in venture funding, regulatory environment and the “rick-averse, disaggregated stakeholders”. Nonetheless, she identifies three significant trends to track during 2015 in a market she believes is right on the cusp of being disrupted.*

First, do-it-yourself (DIY) legal services will continue to gain momentum. An important element in this trend will be an increased focus upon which transactions and processes do or do not require the services of an attorney. Rubin cites the successes in this space such as LegalZoom and RocketLawyer. Even DIY mobile legal apps such as Shake that “create, sign and send” contracts have begun to appear and provide new value to consumers who might otherwise either not have sought to engage a lawyer for certain types of private agreement. However, she further emphasizes that the role of a lawyer still remains quite important when strategic decisions are involved.

Second, the marketplace for alternative arrangements of legal services provided by startups will see continued growth. This includes startups providing new online conduits for locating and engaging lawyers. Cited as examples are Priori Legal (where Rubin is a co-founder and CEO), and UpCounsel, among others.

Third, is the appearance of more versatile and affordable new websites and applications that meaningfully improve attorneys’ efficiency and, in turn, clients’ convenience and satisfaction. These include offerings for legal research, document review, project management, document generation and billing.

I completely agree with Rubin’s assessment these market forces and look forward with great anticipation to additional legal startups launching and shaking up the profession.

The title of a report on TechCrunch.com on August 5, 2014, The Jury Is Out On Legal Startups , appears to say it all. As it describes the current state of this specialized market for technology aimed at supporting law offices as well as benefiting consumers, investments by venture capital investment firms in this sector has fallen rather dramatically thus far in 2014. With just a few exceptions that have received substantial rounds of funding, many other have not fared well in raising money for their operations. I recommend a click through here the full details of this slump including some informative charts and accompanying quotes by experts in this field explaining the difficult dynamics currently affecting this market.

This turn of events and dollars seems to run contra to all of the five far more optimistic and enthusiast posts I have grouped here under the category of Law Practice and Legal Education. These cover different aspects of ongoing innovations in the marketplace for legal services as well as legal education.

Notwithstanding this situation, I continue to remain optimistic about the ongoing prospects for legal startups. There is a vast under-served market for people who need legal services but do not have the funds to engage them. I think it is nearly inevitable that some of these developing systems, services and apps will find a place in this market segment out of pure necessity and the economics of getting things done faster and cheaper. Continuing to monitor this situation will thus likely prove interesting during the next several years. Perhaps there is a legal app yet to be developed that will prove to be so helpful to lawyers and their clients, as has happened in so many other consumer markets, which will act as a genuine tipping point.